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THIN-FILM PHOTOVOLTAICS AND DECENTRALIZED ENERGY PRODUCTION
Authors Daniela Hippler (UNC MBA 2008) Rachel Kuhn (UNC MBA 2008) Jeremy Riberdy (UNC MBA 2008) Abstract Thin-film photovoltaic technologies promise to significantly reduce the costs of solar power generating systems. This paper looks at the economics of residential solar using thin-film technologies. The authors conclude that with recent advances in lower-priced amorphous thin-film photovoltaics, it is now financially feasible to install residential solar on a large scale across the United States.
This paper includes a net present value analysis of the costs associated with grid-tied residential solar systems, as well as a summary of their triple bottom line advantages/disadvantages. Given the positive profile and economies of scale of such systems, the authors recommend utility companies embrace a distributed generation model in which the utility invests in and installs residential solar systems while continuing to maintain the transmission grid. Finally, the authors recommend Las Vegas as a test market for a decentralized energy production grid because of its energy demand and its favorable climate. WHITE PAPER PREPARED BY MBA STUDENTS AT THE UNIVERSITY OF NORTH CAROLINA’S KENAN-FLAGLER BUSINESS SCHOOL
Publication Date 2007
©2007 Kenan-Flagler Business School, University of North Carolina, Chapel Hill, NC, USA. Reprinted by permission. Available online at www.cse.unc.edu. This white paper was prepared by MBA students for class MBA815 Sustainable Enterprise, taught by professor Lisa Jones Christiansen. It is reprinted for educational purposes. Citations and source accuracy have been reviewed, but cannot be guaranteed; clarifications or comments may be directed to firstname.lastname@example.org.
Keywords: Solar energy, renewable energy, photovoltaic, PV, electricity, power, grid, thin film, clean tech, residential, energy efficiency
Challenges Unrest in the Middle East. we believe that the most efficient technological solution is to concentrate primarily on solar energy. nuclear power creates a significant amount of radioactive waste that cannot easily be disposed of and could pose a security risk if obtained by terrorist organizations. Hurricane Katrina. Downloaded from: http://www. continue to receive government subsidies to build power plants that rely on nonrenewable sources of energy. “Solar Future” presentation. faced with increasing demand. W07-003 1 . and cars that run on hydrogen fuel cells may be available in the near future. acid rain. To truly claim energy independence and attempt to mitigate the effects of global climate change. the industrialization of China and India and concerns about global climate change have all contributed to the renewed interested in alternative energy.com/SolarFuture206. New materials and application methods better utilizing PV technology could create the opportunity for homeowners to become net energy providers to the grid in the very near future. S. Although considered renewable. etc) are ultimately powered by the solar energy received by the earth. Electric utilities are well-suited to embrace the technology and should do so in order to prevent the obsolescence of their business model. the rise of Anti-American sentiment in oil-producing countries. Increased efficiency and manufacturing cost reductions have recently made photovoltaic (PV) solar technologies a competitive solution to solving the electrical needs of a large number of homeowners. Soaring gas prices have helped to spur interest in electric hybrid automobiles. As all forms of sustainable energy (wind.pdf. Figure A below shows the Earth’s total energy potential. Continued use of non-renewable energy sources will exacerbate global climate change. low-level pollution/smog.THIN-FILM PHOTOVOLTAICS AND DECENTRALIZED ENERGY PRODUCTION Executive Summary For nearly 30 years solar technology has provided a relatively expensive alternative for homeowners to reduce their dependence on the national electrical grid. utility companies. A number of exotic technologies have recently captured the imagination of the American public. and ozone depletion. the focus must be on renewable sources of energy. Figure A: Earth's Energy Potential Source: Heckeroth. Even as these technologies gain broader acceptance by the general public.renewables. tidal.
html http://www. in effect.S.census. A paradigm shift is likely to occur whereby homeowners would receive monthly checks from the utility for the net excess energy that they produce. its flexibility and “peel and stick” application technique make it much easier to transport and install with less damage during transport. http://www. resulting in 118 m 2 of area available for the application of solar cells. uses 99% less silicon than crystalline PV. and has less loss of operating efficiency at high temperatures. This new photovoltaic technology can convert sunlight into electricity at an efficiency rate of 12%. detached homes) and those less able to provide energy for themselves (colder climates. 1 2 U. In addition. this represents an obvious flaw in the applicability of the technology as it effectively creates an efficiency ceiling that cannot be crossed. Downloaded from: http://rredc.com/pv/techorient.350 square foot home with a gabled roof at a 4:12 pitch. dense urban areas). The thin-film is flexible. Census Bureau.gov/solar/old_data/nsrdb/redbook/atlas/serve. The rooftops of independent residences would.Opportunity We believe that recent advances in amorphous. Thin-film amorphous solar cells are installed on only the south-most half of the roof. Application and Recommendation For the purpose of our calculations we assumed a two-story. and to act as transfer stations between areas that generate excess energy (sunnier climates. thin-film photovoltaics now make it economically feasible to install solar technology on nearly every single-family detached residence in the United States.cgi Unfortunately. and the potential to be installed by relatively unskilled/inexperienced personnel. requires less energy to manufacture. Utilizing traditional crystalline photovoltaics in the southwestern region of the United States was preferred over other parts of the country due to the concentration and regularity of solar radiation (Figure B).asp 2 W07-003 . Source: National Renewable Energy Laboratory.nrel. when installed on a roof plane facing due south. Utilities would still exist to ensure that peak demand requirements are met. and they cover approximately 90% of that surface. Figure B: Average Daily Solar Radiation across the U. We have reduced our efficiency projections to control for the fact that not all homes will have roofs with a plane oriented due south (Figure C)2. account for unexpected events.mysolar. If implemented properly. crystalline PV becomes less efficient in higher temperatures.S.S.gov/hhes/www/housing/census/historic/units. Census of Housing. instead of paying for the utilities to generate their energy. weighs approximately 70% less and costs nearly 50% as much as crystalline PV. The introduction of the Ovonics Thin-Film Photovoltaic provides superior performance even at lower light levels. the energy produced by covering nearly 50% of the approximately 70 million1 residences will generate more power than required for consumption in the U. 2. become a solar array for the utility companies. Average Daily Solar Radiation Per Month using North-South Axis Tracking Concentrator Tilted at Latitude.
etc) with an average of only 3. utilities was 9. As of 2005. 16.1 Consumption 11.4 58. The technology is covered by warranty for 20 years.6 63. Figure E illustrates the assumptions used in our model and the resulting projected cost of electricity in different regions of the U.5 4.informationsavvy. since this is the average number of years that a homeowner will own their home before moving3.471.8 77.5 14.256 11. we then examined the cost implications of the new technology.9 92.256 Surplus 5.6 19.5 kWh/m2/day.5 70.7 Received/day 3. Figure D: Electricity Output by Solar Zone kWh/m2/day Adjusted* Per Year 45.5 Produced/day 49. These costs are based on fairly conservative assumptions regarding the cost of battery technology.333.5 6.589.215.86 cents per kWh.256 kWh.256 11.0 21.Figure C: Efficiency by Roof Orientation Orientation South S-SW (30°) Southwest (45°) West (90°) Average PV Efficiency 97% 95% 94% 78% 91% We then calculated the expected electrical output of the installed system. The estimated cost per kWh using the thin-film solar cells was approximately 14.5 5.471 kWh per year. the Pacific Northwest.4 9.S. on average. This is more than the average annual consumption of 11. using the cost per kWh to produce electricity via thin film amorphous silicon PV cells and benchmarking off of the current price charged by utilities in the United States. and using a fairly short period of amortization. and a sensitivity analysis comparing the cost of electricity in cents/kWh under different sets of assumptions.627.883.9 25. Figure D depicts the expected electricity output of solar arrays installed in the four solar zones occupied by the United States.177.921.com/mortgages/ 3 W07-003 .8 30.41 cents per kWh. but we chose to amortize the costs over a much shorter period of 7 years. the average cost charged by U. 3 http://www. and found that even in the regions of the United States that represent our worst-case scenario (northern New York.S.256 11.1 16.7 Having established that the technology is capable of meeting functional needs.6 83. it is possible to produce.
000.78 Battery Costs $2.22 $0.48 $756.035.19 $378.870.10 $0.00 $2.085.96 $1.83 5 $1.235.83 Cost/year.500.14 $0. Max: $2.354.3 Initial Cost $6.08 $0.96 Expected Case Cost/kWh Cost/kWh produced used $0.11 Cost/year.14 $0.622. but at the same time they would also install photovoltaic sheets on houses.48 $985. and monitoring of usage.000.48 $790.96 $1.48 $690.00 $2. m2: 262. At the same time.32 $517. For the reasons described above.14 Best Case Cost/kWh Cost/kWh produced used $0. expected: $1.96 $1.fireflyenergy.99 $567.Figure E: Model Assumptions and Projections Battery Costs $500.00 Years of life: 7 Cost/year.49 Min Value: $ 311.65 $656.65 $542. The use of photovoltaic electricity production still requires the existence of an electrical grid.96 $1.135. Min: $311.48 15 $623.05 $0.49 $3.php?option=com_content&task=view&id=204&Itemid=89 4 W07-003 .96 $1. In fact.22 $0.48 $723.00 $2.01 $0.19 $361.22 Looking ahead into the future.500.00 Years of Life $1.000.96 10 $935.83 Max Value: $ 2.500. Under our proposal. Rather than fighting the adoption of the new photovoltaics. offer extended life with greatly reduced production costs.06 $0.970. 90%: 118.00 Inverter $2.74 $492.19 $345.470.03 $0.74 25 $374. they have lower barriers to entry than a new player entering the field and relying on the new technology.00 $2.08 $0. we expect that the cost of photovoltaic-generated electricity to rival the cost of traditional coal-fired electrical production with the next ten years.02 $0. a centralized neighborhood battery array.19 30 $311.03 Worst Case Cost/kWh Cost/kWh produced used $0.83 $328.74 $414.74 $494. electricity produced via traditional. new battery technologies.03 $0. we believe that electrical utilities should embrace the new technology and incorporate it into their business model as a real option.96 Assumptions Roof area. and any portion of the grid not installed by the municipal or county 4 http://www.03 $0.16 $2.500.19 $395.15 $0.com/index. it is in their best interests to invest in the technology and lower the costs.00 $2.170.370.14 $0.16 $3.470.470.10 $0. Other costs that we would expect to decrease over time are installation and maintenance costs.500.74 $474.65 $617.83 $2. There will very probably be a financial incentive for customers to switch to the new technology.96 $1. potentially eliminating the revenue streams for traditional electrical utilities. Existing utility companies are already performing this role and are trusted by the public to continue doing so.01 $0.38 South face.00 $1.185.99 20 $467.74 $434.48 $823. the costs of the new solar technology are likely to decrease as the technology enjoys improved economies of scale and also benefits from a learning curve as complementary technologies establish themselves in the marketplace. For this reason. such as the Firefly carbon foam battery4. an electrical utility would come out to new homes and install a meter.12 $0. maintenance of that grid.19 $394.32 $592.01 $0.070.19 $411.74 $454.270.22 $0.071889 Cost/SF $50 Cost/kWh 0. For example. coal-fired techniques is likely to increase in price due to probable cap and trade programs for carbon emissions. as they do now.
we have found that simple changes to the “typical” new suburban home can dramatically reduce the amount of energy consumed (see Appendix 1). solar energy production and the corresponding move towards a more decentralized system of energy sourcing present substantial economic and social opportunities as well. meaning that in time we are likely to hit a carrying limit on the ability of solar to provide all of our required electricity. With the transition to solar energy. However. Thin-film photovoltaics can be stored and transported in a very space-efficient way by rolling them. With decreased usage of coal for the production of energy. While this may be true to a certain extent. the utility thereby pre-empts the destruction of their business model. Another likely critique of solar energy is that the rate of growth in demand for electricity outstrips the rate of improvement in the efficiency of the solar technology. We anticipate that this new model would first be rolled out in areas of the United States where it is the most financially feasible—i. Coal mining has a major destructive effect on the natural landscapes of the mined areas. most residential homeowners are likely to have trouble accepting a large initial investment after generations of paying regular monthly energy bills. Likely Critiques It is important to note that this paper focuses on a suburban model of free-standing. water usage can be decreased dramatically.e.. This translates into reduced CO2 emissions. it will be financially beneficial to roll out the new system in a broader array of states. high growth rate areas with large amounts of solar exposure. W07-003 5 . The concept of the Triple Bottom Line can therefore be used to illustrate the potential benefits and costs associated with solar energy production and thin-film photovoltaics in particular. while simultaneously avoiding huge environmental fines due to carbon dioxide emissions. The spending habits of consumers are also a potential Achilles’ heel of the new technology. Appendix 2 shows that the present value costs of installing solar technology are already lower than the present value costs of corresponding electricity bills when calculated over a period of 15 years. This is an important competitive advantage for a far-sighted utility company. these landscapes can be restored to their natural state. Conservation measures combined with improving efficiency in the technology itself should allow for continued economic growth. In time. This application will have to be modified in an urban setting with higher densities.government. Photovoltaics and the Triple Bottom Line The use of photovoltaic materials on single-family homes and potentially commercial buildings has distinct environmental advantages. Photovoltaics production is much less waste-intensive than sourcing and processing of traditional energy producing materials. in contrast to homeowners. as the new technology improves and as carbon emissions grow more expensive. such as California and the southwestern states. individual houses. Furthermore. A savvy utility could treat this as a real option and invest now in the development of better battery technologies and cheaper production techniques in return for guaranteed access to the technology in the future. Environmental: As solar energy is replacing energy produced by burning fuel. Therefore transportation volume decreases dramatically compared to transporting fossil fuels. Fossil fuel extraction is a water-intensive process. utility companies have already learned to view energy production as an investment and are more motivated to reduce long-term costs. corresponding CO2 and NOx emissions are eliminated. By owning the entire process.
efforts are already being made by companies to adopt solar technologies. the intact houses would still be able to generate power for the neighborhood by feeding all the excess power generated into the neighborhood grid.Economic: With the introduction of new thin-film photovoltaic material. protects the country from having to get involved in conflicts in the Middle East. If most or all the houses within a neighborhood have solar power and only some of these houses are damaged.ikea-group. which offers individual households a substantial advantage over being exposed to volatile energy prices.au/articles/59/0c03c059. the entire area connected to that grid is without power. which is using solar panels at 11 stores across Europe 6. In Europe.ferret. 5 6 http://www. there is no loss due to drops in voltage. The cost of installing a solar system is paid up-front and is therefore predictable. If additional insulation techniques are used on existing homes. it will be easier to restore power in case a natural disaster affects a particular region. the potential applications go beyond single-family homes. this can be alleviated by a job creation in the production of solar technology.asp http://www.pdf 6 W07-003 . Grocery stores and factories with their large roof areas are natural candidates for the adoption of thin-film solar technology.com. increasing socialist tendencies in several countries of South America would be of less concern if the US was less dependent on oil imports from these areas. Right now.) Decentralized energy production by photovoltaics has a higher efficiency than traditional models of energy production and distribution. return on investment can be increased even more. Social: Decentralized energy production translates into a move towards national energy independence.com/corporate/PDF/SandEReport2005_August. As electricity does not have to be transported across many miles of lines. One example is IKEA. if the power grid is damaged. investment in solar technology is viable for a single-family home when compared to current energy costs projected over 15 years (see Appendix 2). Transportation costs can be reduced dramatically if photovoltaics are more widely adopted. Once the use of thin-film photovoltaics is widely adopted and a decentralized system of energy production such as the one we are proposing is established. they can install a CSIRO5 charging station in their own garage. Outlook With thin-film photovoltaics making solar energy production economically viable on a larger scale. as it. The solar energy produced will be sufficient to generate enough hydrogen to power the car. It therefore has substantial political benefits. Application of the technology can easily be extended to the commercial space. Decreased carbon dioxide emissions and a resulting improvement of air quality translate into health benefits for the broader population. for example. However. The thin-film material is far smaller in volume than the fossil fuels that are needed to generate a comparable amount of energy. If a household owns a hydrogen car in parallel to a solar energy system. Furthermore. (See above. One potential social cost of reduced fossil fuel use is a job loss in the utilities and transportation industries.ikea.
its location in the southwestern U. W07-003 7 .Sports facilities are another possible candidate for implementation of thin-film photovoltaics. The seats in large outdoor stadiums provide a large surface area which could potentially be covered with thin film solar cells. The abundance of solar radiation suggests solar energy should be the renewable energy of choice. is ideally suited for solar energy production. Finally. The energy generation potential of this area is enormous and could be used to feed back into the grid for use in homes and commercial buildings. Widespread adoption of new thin film solar technology. The reduction in cost offered by the new thin-film technology coupled with its higher efficiency makes solar collection economically feasible. we suggest using Las Vegas as a test market for the implementation of a decentralized energy production grid. implemented in a network.S. Las Vegas is one of the fastest-growing cities in the United States and its energy demand is significant. can lead to a more economical and environmentally-friendly system of energy production. Additionally.
00 Upfront Savings Saving/yr % Savings/yr Comments Urban infill may save money.00 Unit Savings $0. place windows intelligently. 2x4 walls can take up to R-15. Savings based on DOE study showing $7B savings.com/esb/42/solar.012 $0.971.725.16 $20. Smaller HVAC system = saves on upfront costs plus long-term energy bill savings.84% http://oikos.91 $52.57 $0. reflective.57 $64.15 46.04% Cost is in $/SF based on IECC study. etc. Average price residential construction 14 Insulation Upgrade Better R-value in walls. 16 http://www.379.93 $83.10 $83.65 15. William R.27% 3.00 $0.html 17 http://southface. and Bion D.” Council Proceedings..00 Design Element Site selection Description Select site near public transit.931.55 $874.Appendix 1: Energy Savings Due to Design Change Unit Cost $0.00% Total: Total upfront cost: Total upfront savings with smaller home: Payback period.doe.91 $62.73 $3.96% 5.com/faq/faq_0002.16 $31.30% 0. divided by 109M HH15 Savings of ~ 10% per EIA.7 3.html http://www. downtown may be more expensive proximity to Orientation Size: 10% smaller $0. DOE16 Based on $/SF of windows.44 10.00 $745. avoid destroying established vegetation. in years: IRR: $10.725.00 $135.53% $10. Howard.69 $3.b4ubuild. large home.75 $0.00 $31.30 $384.00 $238.321. tighter construction to prevent air infiltration $0. place doorway out of dominant wind.gov/kids/energyfacts/saving/efficiency/savingenergy.shtml 15 Prindle. greenfield. Avoid large eastern and western wall exposures.17 Caulk/seal/weather strip the exterior envelope Double pane windows Low-e windows Gas-filled windows Solar shade screen Two panes of glass with air gap in between Invisible coating on glass reflects heat Argon added to low-e to increase insulative value Insect screen. applied to exterior $1. with access to efficient utilities. American Council for an Energy-Efficient Economy Deb (2005): 1-43. utilize passive solar Smaller houses = more sustainable Upfront Cost $0. not on farmland. this is not included.25 $4.12 $0.00% BPA study shows 10-20% energy savings just based on orientation.pdf 13 14 . 2x6 walls can take up to R-21. using 15% as average13 $135/SF.eia.org/web/resources&services/publications/factsheets/15windows.27% 3.22 4.00% 5. “Impact Assessment on IECC Wall Criteria Changes.794 14.09 $. All prices are as compared to single pane windows.08 $159. low-e and gas filled prices include cost of going up to double pane and cost of additional film and gas.931.03 $2.00 $0.25 $4.
21 15 $1.709.354.103.3184.108.40.206 7 $1.103.78 $11.103.78 $12.103. 15 years Discount rate: 4.103.354.103.09 $690.09 1 $1.78 Worst Case Solar Scenario Year Cost: PV: ∑PV: 0 $12.103.13 “Typical” Solar Scenario Year Cost: PV: ∑PV: 0 $11.09 9 $1.48 8 $1.09 $832.103.09 $914.46 5 $1.354.354.103.09 $1.09 $599.103.35 4 $1.09 $794.103.09 $572.78 $9.36 3 $1.67 14 $1.56 2 $1.354.354.103.00 ∑PV: $12.09 $758.103.09 $958.78 $11.78 $12.Appendix 2: Discounted Cash Flow Summary.354.58 6 $1.09 $1.052.09 $1.78 $9.78 Best Case Solar Scenario Year Cost: PV: ∑PV: 0 $9.09 $872.24 11 $1.46 13 $1.354.103.09 $658.62 12 $1.09 $546.004.78 .37 10 $1.103.09 $628.09 $723.80% Status Quo Year Cost: PV: 0 $1.
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